BSP jacks up term deposits offering

The Bangko Sentral ng Pilipinas will offer more term deposits at the first auction in the second half of the year amid strong demand from banks.

The term deposit facility (TDF) auction Wednesday, the third since the interest rate corridor (IRC) was launched this month, was again oversubscribed with bids hitting almost P165 billion for the P30-billion offering.

The BSP awarded P10 billion in seven-day term deposits out of the P69.6 billion tendered. Banks also swamped the auction for 28-day term deposits with all the P20 billion offered sold as tenders reached P95.3 billion.

The total bids were higher than last week’s auction that had P156.8 billion, but below the P199.7 billion tendered by banks at the maiden auction on June 8.

The accepted yield was 2.5 percent, similar to the first two auctions.

The BSP will offer another P30 billion in term deposits next week.

However, for the first auction in the second half of the year, set for July 6, the BSP raised the volume to P50 billion— P10 billion in seven-day and P40 billion in 28-day term deposits.

BSP Governor Amando M. Tetangco Jr. said the increased offer for the fifth auction was “part of the refinement of the auction as we see the market become more familiar with the system.”

“We will make further changes in the volume as necessary to make the TDF more reflective of market conditions,” Tetangco said in a text message.

For his part, BSP Deputy Governor Diwa C. Guinigundo said the increase in term deposits to be offered on July 6 was “consistent with an earlier pronouncement that the volume will be scaled up gradually to ensure smooth transition to the IRC regime.”

“We continue to see ample liquidity in the system that warrants an increase in the TDF volume to ensure monetary stability and sustained economic growth,” Guinigundo said.

The BSP started this month the holding of weekly TDF auctions under the IRC, aimed at mopping up excess liquidity and tempering volatility in market rates by moving them toward the policy rate of 3 percent.

The BSP earlier made “operational” adjustments ahead of the implementation of the IRC on June 3. The overnight lending facility—the upper bound of the corridor—was cut to 3.5 percent from the former repurchase facility of 6 percent, while policy rate or reverse repurchase facility was converted into overnight, with its rate cut to 3 percent from 4 percent.